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lordclaxton · Joined: 05 Jan 2010 Posts: 3 1.72 Dollars($)

Hi,

I'm currently living in Gilbert, AZ and have paid off my second loan. My home is currently down by $130K from the purchase price (50K from the first loan). It is hard to rent it out due to location as well as large number of homes in market.

I need to relocate to NJ this year and am looking at possible options for me. Since I have wife + 2 kids, I'm wondering if I can buy a second home in NJ and then foreclose this one in AZ. I can't afford two mortgages but can afford one mortgage. Since my credit history is good (700+), I doubt I can do a short sale since lender may not agree to it.

I believe that in AZ, lender can't sue me for deficiency so foreclosure might be easier. However, if I buy a home in NJ before foreclosing in AZ, can it cause any issues during foreclosure since lender can see another home in the credit report? Do I owe any taxes in case of foreclosure? Are there any other options for me?

Thanks

jenkin7 · Posted: Tue Jan 05, 2010 3:16 am Post subject:

Hi lordclaxton,

If you let your current house be foreclosed, your credit will take a huge hit. It will not be possible for you to qualify for a new home loan immediately after the foreclosure. But in case, you want to purchase the home before your current house is foreclosed, you might be able to do that. But the existing mortgage will be considered as your debt obligation and the lender will check whether you are able to afford the payments on both the loans. So, if your income is not sufficient to afford both the mortgages, you will not qualify for the new loan.

Guest

Great Question! My advice is to try to make an unreasonable offer like a ffirst month rent free so you can get a lease agreement and along with a security check (deposited into your bank account) would giv eyou options to get a loan. Underwriter's are very strict these days to have them beleive that you will simply rent it out. Additionally if you can explain your motivation for your move would be reccomendable.

Laurie Reiss
Financial Mortgage Advisor

[Email address and contact details deleted as per forum rules]

lordclaxton · Joined: 05 Jan 2010 Posts: 3 1.72 Dollars($)

In case I foreclose I will lose around $80K of the amount I've already paid in the loan. Will I also have to pay taxes after foreclosure?

jenkin7 · Posted: Tue Jan 05, 2010 11:38 pm Post subject:

Hi lordclaxton,

If the property sells for an amount less than what you owe, there will be a deficiency. You are responsible for pay it off. In case the lender does not want to sue you for the deficiency and forgives the amount, you will be liable to pay taxes on this cancelled debt. However, you can claim exemption from the taxes under the Mortgage Forgiveness Debt Relief Act, which is applicable to debts discharged in the years 2007 through 2012. You can refer to the following page to check if you qualify for the exemption:
http://www.irs.gov/individuals/article/0,,id=179414,00.html .

lordclaxton · Joined: 05 Jan 2010 Posts: 3 1.72 Dollars($)

Hi Jenkin7,

Is this true for Arizona? I believe in AZ, the lender cannot sue the homeowner for deficiency.

Niicss · Posted: Thu Jan 07, 2010 3:42 am Post subject:

As far as I know, the lender will be able to sue you for the deficient amount in Arizona. However, the deficiency actions must be brought within 90 days of the foreclosure sale.

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